‘Two years is not a long time’: Islamic banking in Tatarstan expands to 2.8bn rubles

Experiment brought 2.8 billion rubles to the cash desk of banking

The results of the first half of the year on the introduction of Islamic banking as part of the federal experiment were summed up on 26 July at a press conference in Kazan. Let's say right away that no one expected stunning turnovers in Islamic banking, if only because Sharia rules prohibit the collection of loan interest (that is, it is also prohibited to pay interest on loans, conduct speculative operations and finance the production of alcohol, tobacco and pork). But interest in halal financial instruments keeps steady.

The volume of transactions in Islamic banking in the first half of the year increased to 2.8 billion rubles, and 1,225 individuals and legal entities became participants, said Ruslan Khaliullin, the head of the Department for Partner Finance at the Ministry of Economy of the Republic of Tatarstan (curator of the experiment in the republic). The growth doubled compared to the same period in 2023, when the federal experiment had not yet been launched and the volume of transactions amounted to 1.3 billion rubles, he said.

The increase is ensured by that the register of the Central Bank includes the largest number of Tatarstan participants — 16 of them, whereas there are 22 organisations in total, Ruslan Khaliullin noted. And the more players there are, the more deals there are in the republic. For comparison, the Central Bank has recently reported that by the results of the first quarter, the volume of transactions in Russia amounted to 2.6 billion rubles, while the number of participants in other regions is not growing yet.

“We need to wait at least for the first year of the experiment to sum up the results”

It was not mentioned which transactions dominate the turnover of Islamic banking — purchase and sale or investment deposits.

“It is too early to say how much of the turnover falls on the retail segment, and how much on the corporate segment. We need to wait at least for the first year of the experiment to make the results," Ruslan Khaliullin noted, adding that “there are those who only attract and those who only place”. But it became clear from the speeches of the participants that the increase is provided by large banks that promote Islamic products in retail. These are Islamic mortgages, payment cards with halal cashback. For example, Ak Bars Bank managed to increase its mortgage portfolio to 1 billion rubles, providing a third of the turnover.

Interestingly, with the beginning of the Ak Bars experiment, the bank managed to reduce the cost of an Islamic mortgage. According to the director of the Islamic banking centre, Marat Sadriev, initially it was issued by a subsidiary of the bank, since he himself could not engage in trading activities (prohibited by the law on banking).

“But during the experiment, such an opportunity appeared, and in May this product was transferred to the bank's balance sheet. It turned out to be cheaper by eliminating the intermediary layer," he explained. However, its volume is small, as it works on a limited scale, and not throughout Russia, he noted. According to him, it can be paid for with the help of maternity capital. It is possible that a preferential family mortgage will be available according to the rules of sharia.

“They don't ask about your religion at the checkout”

"[There are already] 1,225 clients, but there are many representatives of other faiths among them. In fact, you buy halal sausage, but at the checkout you are not asked about your religion," Ruslan Khaliullin added. “The main thing is that people share ethical values, halal is a certain sign of quality.

Ijara, or sharia-based leasing, is becoming widespread in the business environment. The volume of transactions was not mentioned here, the players admit that since the beginning of the experiment, the number of users has doubled. According to Ilnur Sadrtdinov, the director of Ijara-Leasing PLC, their turnover has increased to 551 million rubles this year.

“We have traditional leasing companies in the group and according to sharia norms. In Ijara (sharia leasing — ed.), the cost of leased equipment does not change during the contract, whereas in traditional leasing, the payment is most often tied to the Central Bank rate. Therefore, since the beginning of the special military operation, overdue debt in Ijara was zero, while in traditional leasing, the debt has grown so much that I will not name it," he said about the advantages of Islamic finance. The disadvantage is that they cannot get into the federal programmes of the Ministry of Industry and Trade, which subsidise the interest rate on leasing agreements.

Besides, the business support fund financed small businesses for 51 million rubles, and the guarantee fund provided guarantees to entrepreneurs for more than 9 million rubles.

In the investment sphere, there was an interesting pilot deal the other day, as a result of which we may have a certain analogue of the interbank market. The participants of the experiment will be able to both place their funds, and those who have a cash gap will be able to attract," Ruslan Khaliullin said. We are talking about the issue of sukuk for 1 million rubles, held on July 12, said Renat Yedikhanov, the chairman of the board of AS SALAM. The transaction was carried out on the registrar's Status platform.

What are they afraid of in other regions?

Why are there so few participants from other regions in the register? Maybe they are afraid of the prospect of disclosure to the Central Bank — journalists were interested.

“Special disclosure to the Central Bank is not required, the participants of the experiment fill out a questionnaire, and do not submit reports," Ruslan Khaliullin explained.

In his opinion, the market is starting to take shape, the infrastructure is not built. “We are just starting to figure out what partner financing is. Give us time, and gradually the infrastructure will revive and expand," he reasoned. Besides, it is necessary to exempt transactions from excessive taxation, develop uniform standards and introduce insurance services to guarantee the rights of investors. The participants agreed that 2 years is not a time limit, but the experiment needs to be extended.

“As far as I know, there is no decision yet, it is being discussed. Let's hope that the federal authorities will make a decision," Ruslan Khaliullin said.